Seagate at Goldman Sachs Conference: Strategic Shift to HAMR Technology

On Monday, 08 September 2025, Seagate Technology PLC (NASDAQ:STX) participated in the Goldman Sachs Communicopia + Technology Conference 2025. The company’s CFO, Gianluca Romano, outlined Seagate’s strategic focus on HAMR technology and its impact on revenue and profitability. While Seagate has made strides in aligning production with demand, challenges remain in legacy markets.

Key Takeaways

• Seagate is prioritizing HAMR technology, expecting significant impacts on margins with the production of 40TB drives.
• The company has implemented a build-to-order model, enhancing production predictability and aligning with customer demand.
• Seagate is focused on reducing debt and maintaining strong free cash flow, with plans to keep operational expenses around 10% of revenue.
• The legacy hard drive market is expected to decline, while the data center and cloud segments continue to grow.

Financial Results

• Seagate has seen improvements in revenue and profitability, driven by higher capacity drives and HAMR technology.
• Gross margins have more than doubled due to stable pricing and a better product mix.
• The company has generated enough free cash flow to cover dividends during down cycles and expects a strong fiscal year.

Operational Updates

• The transition to HAMR technology is progressing, with smoother qualifications and four major cloud customers now fully qualified.
• Operational expenses have been reduced by consolidating R&D efforts around HAMR, targeting 10% of revenue.
• The build-to-order model, implemented nine quarters ago, has improved production alignment with customer orders.

Future Outlook

• Seagate plans to ramp up HAMR production, with significant margin improvements expected as 40TB drives are produced.
• The company aims for an 18-24 month cadence between future HAMR product generations.
• Seagate remains open to small acquisitions in the supply chain, focusing primarily on R&D.

Q&A Highlights

• Romano emphasized the importance of visibility and predictability in Seagate’s business model.
• The cost per terabyte of 30TB HAMR drives is similar to the last PMR product, with 40TB drives offering significant cost savings.
• Seagate’s debt level target is between $4 billion and $5 billion, with no maturities in the next couple of years.

For further details, readers are encouraged to refer to the full transcript.

Full transcript - Goldman Sachs Communicopia + Technology Conference 2025:

Gianluca Romano, CFO, Seagate: Very good.

Jim Schneider, SIEM Category Analyst, Goldman Sachs: Okay, with that, let’s get started. Good morning, everybody. My name is Jim Schneider. Welcome to the Communicopia and Tech Conference. I’m Jim Schneider, a SIEM Category Analyst here at Goldman Sachs, and it’s my pleasure to welcome Seagate and CFO Gianluca Romano to the stage with us today. Thank you for being here.

Gianluca Romano, CFO, Seagate: Thank you, Jim.

Jim Schneider, SIEM Category Analyst, Goldman Sachs: Now, Gianluca, just start off with a very high-level industry question. The industry has done a great job of structurally improving itself over the last 18 months or so in terms of higher utilization, big recovery in terms of pricing, and so on. Maybe just give us your high-level view of what are the key elements of what’s driven that improvement in the industry situation from a supply and demand perspective recently.

Gianluca Romano, CFO, Seagate: Okay, and before we start, let me remind everyone that I will be making a forward-looking statement today, and you can learn more about the risk associated with those statements on our website. The industry has improved a lot, I would say, over the last more than two years. As you remember, during the COVID pandemic, many companies were moving data from on-prem into cloud, and that was, of course, bringing the cloud consumption fairly high during those couple of years. The COVID situation improved, but that also meant a little bit of reduction of the growth of the cloud. We entered into a little bit of a down cycle, and about two years ago, maybe nine quarters ago, the cycle started to turn. At this point, we didn’t have any more inventory in our WIP, and we started to have a different discussion with our customers.

We told them we need to have more visibility. We need to have more predictability on what we start. We cannot have a business where we start a lot of volume in terms of wafer heads or media, and then we have those variability in demand. Because we started the production, we need to go to the end. We need to push those volumes to you, and of course, this is not helping on the financial health of this business. We said we want to change it, and that will be beneficial to both of us. More visibility for us, better plan for you in terms of what you can receive in terms of storage. We started the build-to-order, and the build-to-order means customers are giving us orders, and then we start production.

When we start production, we already have a certain volume, a certain price, a certain mix, a certain time for delivery. Everything is way more predictable. We started that nine quarters ago. On top of being more predictable, we said now we need to have a much more fair pricing discussion. We started to increase the price of our product slowly but very consistently. Every time we were renegotiating a new build-to-order, customers that were buying the same product saw our price going up. Customers that were moving to our next product, where we, of course, have a cost per terabyte reduction, were seeing a little bit of that benefit going to them. If they’re not moving again, price was going up. That has helped us to improve not only our revenue, but also very importantly, our profitability.

In that period of time, we basically more than doubled our gross margin, and we have increased a lot our revenue. We said at the beginning of calendar 2025, every quarter we’ll see a higher revenue and a better profitability. We have done it until now, and I’m sure we will do this quarter and next quarter aligned to that visibility that we already had at the beginning of the quarter. What has changed is this ability to work with our customers in a different way. I would say right now, customers are used to that. They understand how to optimize their TCO. That is, qualify next product, go to next product. They get more terabyte per unit, which is a major improvement for them. We get more predictability and more profitability.

Jim Schneider, SIEM Category Analyst, Goldman Sachs: Great. Can you maybe give us a sense of what current exabyte capacity you are running at at this point, where your utilization levels are, both for yourself and for the industry? How much runway do you still have to meet demand without increasing unit production?

Gianluca Romano, CFO, Seagate: I think in terms of units, we are fairly full. I think the industry is fairly full. I think we all sell the units that we produce. In terms of exabyte, it is a different story because you can mix up in capacity and generate more exabyte. This is why we invite our customers to move to the new product. If today they buy a 24 terabyte and they want more exabyte, instead of buying two units of 24, they can buy a 40 terabyte and fairly soon a 50 terabyte drive and achieve the same result without the need for us and the industry in general to have more units. This is where customers get the best result. Lower units, more exabyte. That is the best way to generate profitability for everyone in the storage business, but more importantly, to give the best TCO to our customers.

Jim Schneider, SIEM Category Analyst, Goldman Sachs: If you talk about pricing for a second, if you think about where you sit with your customer discussions today versus a year ago or six months ago, what is their willingness today to accept incrementally higher prices? When you think about pricing, do you think about it on a per exabyte basis or a per drive basis? Are they willing to pay more on one but not the other?

Gianluca Romano, CFO, Seagate: I would say there is no difference. I would say possibly today the gap between supply and demand in the cloud segment is even a little bit bigger than what it was six months ago. There is a little bit more focus from our customers to get exabyte more than working on the pricing. The methodology has not changed. We have used the same methodology for like nine quarters. There is no reason to change. They know that it’s better for everyone when they qualify the next product. Of course, they receive more exabyte from the same unit. We have a cost reduction when they move up in capacity, so good for everyone. When they don’t move to the higher capacity drives, they need to pay a little bit more for the old drive.

Jim Schneider, SIEM Category Analyst, Goldman Sachs: Let’s say we kind of find ourselves in a situation down the line at some point when the industry we discover has overshift in demand and your customers are looking to cut orders to you. How does your build-to-order strategy protect you, if at all, in that kind of situation? To what extent is there a cushion for you or does that create a cushion in the next potential down cycle?

Gianluca Romano, CFO, Seagate: Yeah, I think the very important change compared to the past is the visibility. When we have a build-to-order model, it’s basically covering three, four quarters. Now this is the time that we need to produce a product. We produce the volume that they need, and they have good visibility in those three, four quarters because it’s basically kind of independent from their final demand. Now those three, four quarters depend on how many new data centers they have complete, so they need to install hard disks, how many data centers they want to refresh, and so replace old drive, lower capacity with new hard disk drive, higher capacity. When you go no longer, of course, that then depends on what is their view of demand. I would say for us, it’s very important to start products that we know that will be sold.

They will be sold at a certain time. They will be sold at a specific customer with a price that we have already discussed. There are no discussions at quarter end for volume or pricing or anything. That was the normal way to run the business a few years ago. You arrive at quarter end and you discuss sometimes shipment only the last few weeks, sometimes shipments for the next quarter and the pricing associated. All that completely disappeared from this industry. The visibility helps us. Now we don’t have the need to push product to customers they don’t want. We just produce what they want and the condition that we have mutually agreed.

Jim Schneider, SIEM Category Analyst, Goldman Sachs: Okay, that’s helpful. Maybe one more structural question for you, which is a question I get from investors all the time, or it recurs every 18 months or so, which is if you think about the level of price competition or cost per bit competition between solid state drives and hard drives, how do you summarize the delta in terms of either pricing per bit and total cost of ownership between the two technologies today? Where do you expect that to go over the medium term?

Gianluca Romano, CFO, Seagate: The delta in cost is huge. It’s like between maybe six and eight times. I don’t think it’s so important, honestly. The infrastructure of the cloud is built in a way that they buy both hard disk and NAND, but to different users. The optimization of the storage is done with hard disk. To run the application, you need NAND and DRAM and GPU and CPUs and many other components. The data is moved from hard disk into an SSD. They run the application where they want to do, and then they save it back into hard disk. The delta in pricing, I don’t think is so important. We have seen different timing and different cost curves and different pricing for those two technologies. The cloud infrastructure has not changed. It’s still 90% of the data is stored on a hard disk.

10% is actually what is in use, so it’s on an SSD. I don’t think it’s important, but in any case, there is an enormous difference in terms of cost per terabyte.

Jim Schneider, SIEM Category Analyst, Goldman Sachs: Yeah.

Gianluca Romano, CFO, Seagate: I think HAMR actually will increase this gap. As I said before, the cost curve is very different in terms of timing. The NAND went from planar to vertical, and then from 32 layers, 64 layers, you generate a lot more gigabytes per wafer, so a lot of cost reduction. You go to 96, 128. The benefit of that technology starts to decline. It’s still giving cost reduction, but starts to decline in terms of impact. HAMR is just starting now, where we go from 24 terabyte PMR platform into a 30 terabyte HAMR-based Mozaic drive, into a 40 terabyte HAMR-based Mozaic drive that we started to qualify last month. The cost curve of HAMR just started. The difference between the decrease in NAND cost and the decrease in hard disk cost, I think for at least a certain number of years, is not going to reduce.

It’s actually going to increase.

Jim Schneider, SIEM Category Analyst, Goldman Sachs: Great. That kind of segues into the next topic, which I want to discuss, which is HAMR. That’s a technology you’ve been very vocal about and which you’ve been through a fairly lengthy qualification with your lead CSP customer on recently. When you look forward to qualifying other customers in the HAMR technology, do you anticipate as many kind of stops and starts or as many kind of complications with those next customers as with the first one? Would you expect that to be, over what timeframe do you expect those to be completed?

Gianluca Romano, CFO, Seagate: No, I would say the first qualification took a little bit longer than what we were planning because it was the first time we were qualifying this technology. We had to find the right configuration for the cloud. We were actually fairly quick in qualifying HAMR in other segments, but when we had to qualify HAMR in the cloud, it took us maybe six to nine months longer. This was customer number one. Customer number two, three, and four, no problem. It went very fast. We were a little bit surprised by the timing of the call of the last customer. We qualified a little bit earlier than what was planned, and we announced last week. Now we have four cloud customers out of the big seven that are fully qualified on HAMR. Three of the major four U.S. customers and one that is outside the U.S.

We also discussed at our earnings release that we started the qualification of 40 terabyte drives with one of those four customers in July. Everything is progressing right now very smoothly. No problem.

Jim Schneider, SIEM Category Analyst, Goldman Sachs: When you think about the revenue ramp from those different customers, would you expect the other three customers to ramp to the same size and/or as quickly as the first one?

Gianluca Romano, CFO, Seagate: I would say it’s kind of independent from the technology. They ramp based on their need. Of course, when they are qualified on HAMR, they want to buy HAMR because it’s bigger capacity per unit, so they have a better TCO. They will try to get more HAMR. HAMR also depends on our ramp. It takes a little bit of time to ramp all that volume. As we said, we wanted to qualify first, get the build-to-order, and produce the product that they want. You will see a good improvement in HAMR production every quarter. The more customers we have, the more volume we can allocate to HAMR compared to the prior technology.

Jim Schneider, SIEM Category Analyst, Goldman Sachs: When you think about the cost competitiveness of HAMR on a price per bit basis or cost per bit basis relative to advanced PMR technologies, where does that stand today? How do you expect that to evolve over the next 18 months?

Gianluca Romano, CFO, Seagate: Yeah, at our investor day, end of May, we presented a slide where you can actually see the difference in cost per terabyte. We show our last product in the old technology, so in PMR technology, and then the first product in HAMR that is a 30 terabyte, and then the 40 terabyte and the 50 terabyte. You can see in terms of cost per terabyte, the last PMR product and the 30 terabyte are fairly close. The 30 terabyte HAMR is slightly better, but not so much better. Of course, we go up in capacity from 24 to 30, so six terabyte more. Of course, HAMR has some components that we don’t have in the old technology and some components that are a little bit more expensive. It’s already better.

When you go from 30 terabyte to 40 terabyte, that’s a big cost saving because now you have the same number of heads, the same number of disks, the same kind of components that you use. Some components continue to be a little bit more expensive, but you get this benefit of basically very similar bill of material and 10 more terabyte per unit. That’s a huge difference going from first generation HAMR 30 terabyte to second generation HAMR 40 and then 50. This brings back what I was saying before in terms of cost curve between the hard disk today and the NAND. The hard disk cost decline is happening right now. The NAND cost decline happened years ago when the technology moved from planar to vertical.

Jim Schneider, SIEM Category Analyst, Goldman Sachs: Yeah, so more or less on parity at 30, but a very clear crossover by the time you get to 40.

Gianluca Romano, CFO, Seagate: Yeah.

Jim Schneider, SIEM Category Analyst, Goldman Sachs: How do we think about HAMR’s impact on your gross and/or operating margins? What does the path to margin accretion on either front look like?

Gianluca Romano, CFO, Seagate: Oh, it’s a big help. It’s already helping a little bit today. As you know, we will ramp much more volume. As I said, the 30 terabyte HAMR doesn’t have the same benefit of the 40 terabyte HAMR. We will see much more in the near future when we start ramping the 40 terabyte HAMR. I think this fiscal year is mainly the 30 terabyte ramp and the 40 terabyte call. Probably next fiscal year, you will see the benefit of the 40 terabyte ramp in high volume. Now we are also in a kind of unusual situation where the 30 terabyte and the 40 terabyte, they’re fairly close in time, mainly for what we discussed before. The 30 terabyte was a little bit delayed in terms of call, but the 40 was not, so they’re very close. Today there are both products that can be qualified.

In the future, I think between 40 and 50, probably you will see between 18 and 24 months. It’s more the normal cadence for those products. In that period of time, you grow from 40 to 50, 50 to 60. There are huge improvements and increases in terms of terabyte per unit, but it takes more time than what you have seen today between 30 and 40.

Jim Schneider, SIEM Category Analyst, Goldman Sachs: Yeah, relative to your portfolio, VIA is a relatively small piece of that, but I think you started disclosing recently that the nearline mix within that is relatively heavy. Maybe talk about the growth of that subsegment and what it’s looked like for you recently. Would you expect that subsegment to kind of outgrow the broader VIA business over the next year and a half or so?

Gianluca Romano, CFO, Seagate: Yeah, as you said, it’s not a big part of our business today. The cloud is the one that is really taking the vast majority of the exabyte that we produce, but it’s an important segment. We have seen a change a little bit in their business model. In the past, they were basically providing the video system. If you have the need for a surveillance of a certain building, they were providing that with low capacity drives. As a video camera, and they are all connected to a fairly low capacity drive. You couldn’t save or store your data with those customers of ours. You had to move the data into your on-prem data center or to a public cloud. A few quarters ago, they started to buy high capacity drives, not low capacity, high capacity drives.

Now we were working with them, and they said that they now offer a kind of a simplified cloud. If you have their system and you want to keep your data into a kind of simplified cloud, they can do it for you. They offer this service. They buy higher capacity drives to do their own little cloud. This is why now we have basically separate via in between what is a cloud service and what is a client service that is still related to the video camera system.

Jim Schneider, SIEM Category Analyst, Goldman Sachs: Great. Also, maybe I want to ask you about the legacy market. Again, not a huge piece of your mix, but clearly that segment has been, as mass capacity has increased, it’s been on a bit of a downward trajectory. If you think about the longer-term health of that segment or the growth of that segment, do you expect some stability for legacy, or do you kind of keep expecting it to continue to decline on either an absolute or relative basis in the out years? If there’s stability, what applications would support the long-term presence in the market?

Gianluca Romano, CFO, Seagate: Yeah, so we discussed this at our last earnings release, but no, we look at the business in two major segments. The data center, that of course includes the public cloud, on-prem data centers, or enterprise OEM, that part of the data center business, and the edge. The edge is more client-consumer, mission-critical, the client. This part, we probably do not expect to grow. Especially the client base is declining. The low capacity drives, they’re probably more and more replaced by the NAND because the NAND is used to run the application. You don’t really store your data in your laptop, but you need the NAND to have your laptop performing well. If you are an engineer, maybe an AI engineer, and you generate many terabytes of data, you don’t store in the laptop. You store in the cloud. It is a different location where the storage is done.

Many years ago, when the hard disk business, the majority of the hard disk business was client, everyone was storing data in their laptop or in their PC. Now everyone, especially people that create a lot of data, stores the data in the cloud. It is not a replacement of the storage. The storage does move to the cloud, and hard disk moves to the cloud. Now more and more, if you want to use a high-performance laptop or desktop, you probably don’t need to have a hard disk there, and you can use the NAND and just save your data in your on-prem data center of your company or in the cloud. I think the edge will probably continue to decline, as we have seen in the past, and you have a different trend in different periods of time. Cloud, the data center will continue to increase.

However, we don’t know about future applications. If there is an application that requires a decentralized storage, then you could see hard disk at the edge starting to grow. It depends on what will be or what kind of application we will need in the future in terms of storage.

Jim Schneider, SIEM Category Analyst, Goldman Sachs: Great. Now I’d be remiss if I had you and didn’t ask you some financial questions, so let’s do that. One of the questions I get most frequently from investors is regarding gross margins. Maybe provide your perspective on how much room you have to expand gross margins over the next 12 to 18 months from current levels. What are the main drivers of that? Whether that be pricing, cost structures, HAMR mix, or otherwise.

Gianluca Romano, CFO, Seagate: At the beginning of this calendar year, we said every quarter we would see higher revenue, higher profitability, and now we are going exactly in that direction. We said we discussed before about pricing. The pricing strategy is not changing. It is the same. We expect a similar result. We will have a big help from the mix, moving from 24 terabyte to 30 terabyte to 40 terabyte. That is where we generate a cost reduction and therefore an opportunity for us to improve our profitability. We have not discussed calendar year 2026 yet. We will do, I guess, fairly soon. I don’t see any reason to have a different trend. As I said before, demand, especially in the cloud space, is very strong, even stronger than what we were expecting a couple of quarters ago.

We are going in the right direction, and we don’t see a reason for any change.

Jim Schneider, SIEM Category Analyst, Goldman Sachs: Stable pricing, better cost, and better mix.

Gianluca Romano, CFO, Seagate: I would say a better mix, but also drive better cost. The pricing strategy has not changed.

Jim Schneider, SIEM Category Analyst, Goldman Sachs: Great. One of the takeaways I had from your analyst day a little while ago was your OpEx efficiency that you’re trying to drive. Between you and your main competitor, there’s a 4% gap in your latest target financial models. To what would you attribute that difference? Could you maybe address the level of confidence you have in achieving the somewhat higher level you’ve laid out?

Gianluca Romano, CFO, Seagate: Yeah, we have reduced our OpEx in the last more than two years. The main reason is in the past we had to develop a new technology, and we had to develop products in the old technology because we were still having development in products from the PMR technology. We had, let’s say, two different teams. Now we don’t develop anything in the old technology anymore. We don’t have PMR development anymore. Everything is on HAMR. We don’t need two teams. We just need one team focused on HAMR. We don’t need to develop the technology really anymore. We have the technology, so we just need to develop future products. That is not easy, but it is, of course, requiring a smaller pool of resources compared to what we were doing in the past.

We were able to reduce our resources, and we said at Analyst Day, our target is to achieve about 10% of revenue in terms of OpEx. We will see in the next several quarters where we are.

Jim Schneider, SIEM Category Analyst, Goldman Sachs: Very good. You’ve also made a lot of progress in paying down your debt. Has the $5 billion gross debt target shifted at all? How do you think about your realistic target for debt levels in the next sort of one year, two years, or longer?

Gianluca Romano, CFO, Seagate: Yeah, we had a first major goal that was to achieve $5 billion. We were above $6 billion a couple of years ago. We wanted to reduce that to $5 billion. I think $5 billion is very manageable for us in any part of the cycle, if any cycle will happen even in the future. I think we can go even a little bit lower. I think a good way to think about our debt is probably between $4 billion and $5 billion. We don’t have any maturity in the next couple of years. We will see when is the right time, but probably between $4 billion and $5 billion is where we want to be.

Jim Schneider, SIEM Category Analyst, Goldman Sachs: Good news. Good flexibility to be able to have that flexibility. Maybe just on free cash flow for a second. I mean, the CapEx intensity of the business is pretty low at this point. You’re on track to generate substantial free cash flow over the next couple of years. How do we think about your business from a free cash flow margin perspective? Is there any target you feel comfortable sort of attaining over the medium or even longer term?

Gianluca Romano, CFO, Seagate: Yeah, free cash flow will be strong. We have actually generated a good free cash flow during the two years of the down cycles. In fiscal 2023 and fiscal 2024, we generated enough free cash flow to completely pay our dividends and so supporting and protecting our dividends. Last fiscal year was a little bit of the opposite. We had to rebuild a little bit our working capital. We had to stretch that working capital in fiscal 2023 and 2024. We rebuilt it during fiscal 2025. Last quarter of fiscal 2025, it was June, we generated a very good free cash flow. I would say that part is done. I think now our free cash flow will trend very similar to our net income. It will be more aligned to that. I expect this fiscal year to generate a very good free cash flow.

Jim Schneider, SIEM Category Analyst, Goldman Sachs: Great. Maybe I’ll just conclude on the final question regarding M&A. How do you think about your M&A posture going forward? Is that something that’s on the table for you? Do you see any interesting adjacent product areas that could be complementary for Seagate over time? How do you think about that piece of the capital allocation strategy?

Gianluca Romano, CFO, Seagate: I would say we are mainly an R&D company. We like this industry, especially right now. The industry is very consolidated, so there is not much that is possible to do in this industry. We have done some small acquisitions in the supply chain. I don’t exclude we could do something in the future, but nothing that we have visibility or a specific target right now.

Jim Schneider, SIEM Category Analyst, Goldman Sachs: I think with that, we’re almost out of time. Gianluca, thanks very much for being here. We appreciate it.

Gianluca Romano, CFO, Seagate: Thank you very much.

Jim Schneider, SIEM Category Analyst, Goldman Sachs: Thank you.

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